A concern for many Auburn students is whether the PACT program will continue to pay for their education. Many ideas are being tossed back and forth among legislators about how to rescue the plan.
The plan was created by then State Treasurer George Wallace Jr. to help low-income families seeking financial aid, but were unqualified for grants.
“It was a solid plan that worked well for two decades,” Wallace said.
He said the reason for the current PACT problem is the combination of the downturn in the market and the increase in college tuition.
Wallace has decided to run for treasurer once again—his primary focus being to rescue the PACT plan.
He said he thinks it is important to finish what he started.
There are several proposals of how to save the plan.
Wallace said he thinks the best solution proposed thus far is to borrow money from the Alabama Trust Fund, which gets its funding through royalties from gas and oil companies.
Wallace said he does not think taxpayers should have to pay out of their pockets to help save the plan.
According to Wallace, $50 million would help the plan “get back on sound footing until the market recovers.”
Robert Bentley, one of the gubernatorial candidates for 2010, has been actively working on ideas to help save the PACT plan.
Bentley said he thinks Alabama has a moral obligation to honor all PACT plans.
Bentley’s proposal is to freeze the PACT plan by not allowing any more people to purchase it and to continue to cover those who are already using the program.
Then, he proposes Alabama take that money and set up an annuity program with insurance companies. That way the plan would receive the same amount of funding every year for 20 years.
The amount would be $35 million per year, but that might not be enough, Bentley said.
Bentley suggests Alabama borrow the remainder of the needed funding from the Alabama Trust Fund, which is Alabama’s savings plan. Then, as the number of students covered by the plan decreases over the next 10 to 12 years, there will be more money available than is needed.
So then the excess money would be paid back to the Alabama Trust Fund.
“It is not a bailout, it is just a loan,” Bentley said.
If this proposal is implemented, taxes will not be raised in order to help fund the PACT plan.
And as far as the PACT plan goes, Bentley said he is sure the present problem will be solved.
Kay Ivey, state treasurer, is also a gubernatorial candidate for 2010. She disagrees with the proposals to borrow money from the Alabama Trust Fund to rescue the PACT plan.
“It is not the right way, but it is not the only way,” Ivey said.
Ivey said in order for a proposal to have her support, it would have to meet a variety of requirements.
Ivey said she agrees all students who are currently using the plan should continue to be covered by it, and taxes should not be raised in order to rescue the program.
However, Ivey said she thinks a cash infusion should come from a variety of sources. She also said she thinks something should be done soon.
The PACT plan is not a state program, but was created by the legislature, said Mike Reynolds, the University’s executive director of student financial services.
It is a contract between the PACT program and the purchaser.
Because of that, Auburn is not looking for ways to assist those students who are using the plan to pay for tuition should the PACT program run out of funds, Reynolds said.
It would be different if Auburn offered such a plan.
There are approximately 2,500 students at Auburn who currently use the PACT program.
He said it would be unfair to assist them when parents who invested in 529 plans or the stock market are suffering, too.
Freezing tuition is not an option, Reynolds said.
Auburn’s appropriations from the government are being cut, but the University wants to ensure that it will be able to continue educating students at the present level of quality.
Increasing tuition is one of Auburn’s primary methods of making up for budgetary limitations, Reynolds said.
For students relying on the PACT plan to get to college, their only hope may be for the legislature to find a solution for the present problem.
“I feel pretty confident that they will come up with a solution,” Reynolds said.